Costa Rica-highlights

Costa Rica
Public Governance Reviews
HIGHLIGHTS
2015

What are Public Governance
Reviews?
OECD Public Governance Reviews provide governments
with a 360 degree perspective on their ability to deliver on
government objectives. The reviews offer in-depth analysis
through a peer review process, a diagnosis of issues at
hand, actionable recommendations, capacity building
and implementation support. The aim is to strengthen a
country’s potential for sustainable, inclusive growth and to
improve the well-being of its citizens.
Since 2007, over 15 Public Governance Reviews of OECD
member and non-member countries have been conducted.
WHY A PUBLIC GOVERNANCE REVIEW OF COSTA RICA?
As part of ongoing efforts to improve public governance, the
government of Costa Rica has asked the OECD to carry out
a Public Governance Review to analyse the strengths and
weaknesses of its public administration, and to identify ways
to improve the performance of the state in order to ensure
more effective and efficient service delivery for all citizens.
The Review contributes to the country’s reform agenda,
which aims to sustain important achievements in terms of
socio-economic development, and to provide enhanced and
sustainable prosperity for its entire population.
These Highlights summarise the main findings of the six
thematic areas of the Review:
l Centre of government co-ordination capacity
l Policy monitoring and evaluation
l Budgetary framework and strategic planning
l Human resources management
l Integrity policies in public procurement
l Multi-level governance

1
HIGHLIGHTS
CostaRica
“The review provides an in-depth diagnosis of the
main challenges that Costa Rica is facing in key areas
of public administration, such as the capabilities
of the central government and integrity in public
procurement. I am very pleased, because the study not
only generates a clear picture of our reality, but also
provides a series of recommendations to address the
challenges identified. The government is committed
to implementing the measures required to promote,
in this and other areas, a substantial change to
improve the welfare of citizens and the efficiency and
effectiveness of the state”
LUIS GUILLERMO SOLÍS RIVERA, President of Costa Rica
COSTA RICA 2014
Population 4,938,000
Total area 51,100 km²
GDP/capita USD 9,750
Annual GDP growth 3.7%
Unemployment rate 9.7%
Life expectancy 80 years
http://databank.worldbank.org/data//reports
Angel Gurría, Secretary-General of the OECD meets Luis Guillermo Solís Rivera, President of
Costa Rica on his official visit to the OECD in Paris, 5 June 2015. Photo: OECD/Hervé Cortinat

2
A changing economy
and society
OECD : PUBLIC GOVERNANCE REVIEWS – COSTA RICA HIGHLIGHTS
Costa Rica’s political and economic model has been characterised for decades by high political stability
and stable economic growth, allowing the country to perform well on social development deliverables
like education and health. However, inequalities are on the rise, important economic pillars such as the
high-tech industry and tourism have come under pressure, a fragmented public sector is struggling to
deliver policies and services effectively, and citizens are increasingly losing trust in public institutions.To
sustain past achievements, the country’s governance system needs to find ways to successfully cope with a
changing economy and society.
l Strong mechanisms to oversee state action and to
protect human and democratic rights, including
the introduction of the Constitutional Chamber in
1989 and the Ombudsman in 1992.
l Overall positive economic growth and relative
monetary stability, with an average of 5% growth
rate throughout the 1990s. While growth slowed
down in the 2000s, it remained significantly higher
than in other Latin American countries.
l Strong social development and improved living
conditions. New economic opportunities fostered
by economic growth as well as the existing social
security networks have contributed to social
mobility and a growing middle class.
l Commendable results in the areas of education,
environmental protection and health, including
low illiteracy rates and a high average life
expectancy.
SOCIO-ECONOMIC AND GOVERNANCE CHALLENGES
l Regional disparities in economic and social
development across the country. In particular, there
is a large urban-rural split.
l Rising inequalities. Despite an expanding middle
class, the country’s Gini coefficient, as a measure of
national income distribution, has been rising.
l An economic model under pressure. Increasing
regional competition in key sectors such as tourism
and high-tech industry is putting pressure on Costa
Rica’s economic performance.
MAJOR LONG-TERM ACHIEVEMENTS l A fragmented public administration, characterised
by an important number of subsidiary bodies
of central government ministries and a large
institutionally decentralised sector (e.g. semi-
autonomous and autonomous bodies), with limited
steering and accountability mechanisms.
l A large share of the budget (about 50% of total
consolidated general government spending) falling
outside the budgetary preparatory process headed
by the Ministry of Finance and excluded from direct
scrutiny by the Legislative Assembly.
l Fiscal sustainability under pressure, with one of the
largest (and rising) deficits in the region, a low tax/
GDP ratio according to regional and OECD standards,
and rising debt figures, combined with a very high
level of budgetary provisions at constitutional and
legal level.
l Decreasing trust in public institutions. According
to the Gallup World Poll 2014, levels of trust
in government have dropped from 53% to 40%
between 2010 and 2014, which is substantially more
than the average decline across OECD countries for
the same period.
l A complex legislative process. Partly due to its
relatively weak constitutional powers, but also to the
shift from a bi-partisan to a multi-party system, the
Executive is in a weakened position to put forward its
legislative agenda.
l A rebalance of power throughout the policy-
making process. The creation of the Constitutional
Chamber (1989) and the considerable increase in the
number of constitutional decisions have resulted
in a shift in the distribution of power across the
executive, the legislative and the judicial branches.

A CHANGING ECONOMY AND SOCIETY
HIGHLIGHTS
PUBLIC GOVERNANCE: THE WAY FORWARD
l Modernise human resources management in
the public sector by reinforcing areas such as
workforce planning, competency management and
a transparent compensation system.
l Develop a cohesive procurement vision, to move
away from a fragmented and primarily ex ante
control based approach.
l Reinforce the subnational governance level,
coherent with the 2001 constitutional reform.
The 2015-2018 National Development Plan reflects the
government’s will to move forward towards a more
effective, efficient, participatory, open and transparent
government that fosters inclusive growth. While important
efforts have been made to modernise the country’s public
governance system, further progress should be made to
make Costa Rica a forward-looking, resilient state:
l Strengthen the centre of government’s leadership
and co-ordination capacity as a response to high
levels of political and public sector fragmentation.
l Move from a process-oriented to a results-oriented
monitoring and evaluation culture, where relevant
policy information is used strategically.
l Address multiple budget-related challenges,
including high budget rigidities, a lack of fiscal
space and weak fiscal constraints.
Costa Rica’s president Luis Guillermo Solís poses with members of his
new ministerial cabinet, in San Jose, April 14, 2014.
3

4
Across the OECD, the centre of government (CoG) is undergoing a shift from a primarily administrative
support function to a position as strategic player with important responsibilities in fostering vision,
leadership and innovation across the public sector.
Enhancing the co-ordination capacity
of the centre of government
CURRENT CENTRE OF GOVERNMENT ARRANGEMENTS
l Costa Rica 2030 National Development Goals,
published in 2013 by MIDEPLAN with the support
of UNDP, and complementary to the four-year
National Development Plan.
l The National Planning System, as the key
mechanism for the monitoring and evaluation of
public policies, plans, programmes, projects and
strategic actions of the government in a systematic,
public, independent, and participative way.
l Sector planning and co-ordination, defining the
organisation of the sector co-ordination comprising
central and decentralised institutions. The sector
co-ordination responsibility lies with the head
of the central government institution, not the
institution itself.
l The Interministerial Planning-Finance Commission,
with the objective to issue and standardise technical
and methodological guidelines for programming,
monitoring and evaluating budget execution at a
strategic, sectorial and institutional level.
l Presidential Councils, composed of Ministers (or
their representatives) and other public institutions.
Their functions include advising on and co-
ordinating public policies, as well as planning and
designing objectives, goals, actions, indicators and
control mechansims.
l The Better Regulation Commission, as an advisory
body attached to the Ministry of Economy, Industry
and Trade, addressing issues of regulation and
administrative simplification.
l Thematic cross-government co-ordination defined
by law, such as for the fight against poverty.
Main actors
l The Ministry of the Presidency is responsible
for providing political and technical guidance
to the President in decision making, fostering
communication and co-ordination.
l The Ministry of Planning and Economic Policy
(MIDEPLAN) – its primary duties include preparing
the National Development Plan (NDP); checking the
alignment between public investment projects and
NDP priorities; approving investment projects of
public agencies.
l The Ministry of Finance (Hacienda) co-ordinates the
budgetary cycle for the central government budget
(i.e. ministries and their deconcentrated bodies).
l The Budgetary Authority is in charge of advising
the President on budgetary policy and proposing
the budgetary guidelines for most of the public
sector, including central government, decentralised
bodies and state-owned enterprises.
(Ad hoc) instruments
l The National Development Plan, presenting the
government’s policy agenda for the President’s four
year term of office.

HIGHLIGHTS
ENHANCING THE CO-ORDINATION CAPACITY OF THE CENTRE OF GOVERNMENT
The Centre of Government in Costa Rica faces the
following challenges:
l Long-term vision, leadership and innovation in a
difficult fiscal context.
l Political fragmentation, which puts pressure on the
strategic leverage of the CoG.
l Public sector fragmentation, in particular
because of the importance of the institutionally
decentralised sector, with few steering and
co-ordination mechanisms in place.
l Capacity constraints at both technical and
strategic level across CoG actors, aggravated by
substantial turn-over of staff due to government
change.
l Enhance the strategic role of the Ministry of
the Presidency in supporting the quality of the
decision-making process of the Council of Ministers.
l Encourage structural investment in centre of
government capacity building through technical
training and the development of soft skills, with
the Ministry of the Presidency and MIDEPLAN as
primary beneficiaries.
l Develop a clear policy and a set of instruments
to ensure centre of government steering of the
institutionally decentralised sector.
l Develop a multi-stakeholder follow up mechanism
of the National Development Plan.
l Develop consultation principles to be adopted
throughout the public sector to make sure that
citizen participation goes beyond the initial
development of the NDP.
CHALLENGES NEXT STEPS | CENTRE OF GOVERNMENT
http://presidencia.go.cr/blog-presidencia/125-plan-nacional-de-desarrollo-2015-2018/
1 2 3PROMOTE ECONOMIC
GROWTH AND QUALITY
EMPLOYMENT
FIGHT POVERTY
AND
INEQUALITY
OPEN GOVERNMENT,
TRANSPARENCY,EFFICIENCY
AND FIGHT AGAINST CORRUPTION
5
NATIONAL DEVELOPMENT PLAN
The new NDP 2015-2018 is based
on three pillars:

Although Costa Rica formally established a national monitoring and evaluation system about two decades
ago, it has not fully made the shift to result-oriented monitoring and evaluation. Challenges include
the strategic use of performance information, the fine-tuning of the budget and policy cycle, and policy
evaluation capacity constraints.
Monitoring and evaluation as a tool
to become result-oriented
l A comprehensive legal framework for monitoring
and evaluation – Costa Rica has developed an
extensive legal framework for both monitoring and
evaluation.
l A clear institutional set-up – the National
Evaluation System (SINE) is managed by MIDEPLAN,
which co-ordinates actions of the other ministries
and institutions, as well as with sectors. It is
defined as an instrument for evaluating national
development and social welfare through monitoring
and evaluation of the results of the NDP and
other planning instruments, and for promoting
accountability and feedback.
CURRENT MONITORING AND EVALUATION ARRANGEMENTS
l The FOCEVAL programme (launched in 2009) –
the programme is a strategic partnership with the
German government focused on raising awareness
and promoting a culture of evaluation and
transparency as a basis for public policy decision-
making.
l Review of monitoring and evaluation activities
– the government is currently reviewing its
monitoring and evaluation activities, with the
aim of strengthening the strategic added value of
both activities (e.g. through the introduction of a
quarterly reporting mechanism for strategic NDP
projects).
6
MAIN ACTORS INVOLVED IN THE NATIONAL EVALUATION SYSTEM (SINE)
President of the Republic Political decision based on monitoring and evaluation reports on pre-established
strategic priorities.
MIDEPLAN SINE co-ordinator, responsible for issuing guidelines and leading the monitoring and
evaluation processes.
Public institutions Implementation, monitoring and evaluation of public policies, plans, programmes
and projects, through its planning units.
Ministry of Finance Allocation of financial resources.
Control over public expenditures (central government).

MONITORING AND EVALUATION AS A TOOL TO BECOME RESULT-ORIENTED
l Promote a result-oriented monitoring and
evaluation culture across the public sector.
l Develop a balanced approach between
‘accountability’ and ‘learning’ objectives, to
safeguard the opportunity to learn from occasional
weak performance and policy failures.
l Focus on capacity strengthening of all actors of the
monitoring and evaluation chain.
l Provide incentives to actors involved in the use of
monitoring and evaluation data, such as rewarding
goal achievement.
l Allow for gradual development of the monitoring
and evaluation system, with a focus on getting
the basics right and subsequently identifying more
ambitious goals.
l Promote citizen and stakeholder participation in
the evaluation process.
Making the most of investments in monitoring and
evaluation requires a commitment to:
l Address missing links. These missing links
start at the planning system – about 60% of the
ministries do not have a strategic plan according
to information provided by MIDEPLAN – and
culminate at the very end of the monitoring and
evaluation cycle (lack of feedback mechanisms
based on available monitoring and evaluation
information).
l Strategic use of performance information. Whereas
MIDEPLAN is entrusted with co-ordinating SINE and
providing technical guidance on monitoring and
evaluation procedures, SINE was not always used as
the institutional support network for research and
strategic analysis in the past.
l Fine-tuned budget and policy monitoring. There
remain important challenges to enhance the
compatibility between the SINE methodologies and
the more traditional budget monitoring.
l Address capacity constraints. Historically,
MIDEPLAN has had an agenda for training and
skills development. However, there persists a need
for permanent training and skills development
and for embedding the acquired skills in daily
management practices.
CHALLENGES NEXT STEPS | MONITORING AND EVALUATION
7
HIGHLIGHTS
OECD practice suggests that the following elements are required
to obtain and use the‘right evidence’:
l a sound methodology that allows for proper consideration of
the immediate and long term nature of the issue and of the
rationale supporting different options for policy intervention
(including doing nothing);
l good data for analysis;
l public access to the data, assumptions and methodologies
used to frame the issue and identify options to address
it, so that it can be scrutinised and the analysis replicated
independently;
l time to carry out this analysis properly and to
consult the general public on its results;
l a capable and skilled public service, including people skilled in
quantitative methods;
l a‘receptive policy-making environment’– that is, political leaders
who are willing and able to decide on the basis of the evidence
presented.
OECD (2013), Public Governance Review of Poland: Implementing Strategic-State
Capability, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264201811-en.
EVIDENCE-BASED DECISION MAKING

8
Costa Rica made the most of traditional budget systems. It now needs to take a step forward and look
at modern budgeting practices in order to make sure that the priorities expressed in the National
Development Plan are actually financed and the corresponding programmes implemented, while ensuring
long-term fiscal sustainability.
Strengthening the budget framework
for strategic planning
l The budget process is well institutionalised –
regulated by the Constitution and by the Financial
Administration Act of the Republic and Public
Budgets. The national budget is issued for 1 year,
from 1 January to 31 December. The annual budget
is based on goals and priorities that must be linked
to the National Development Plan.
l A clear institutional set-up of the national budget
– the co-ordination of the budget process is assured
by 4 key actors.
CURRENT BUDGETARY ARRANGEMENTS
l The institutionally decentralised public sector
is not covered by the national budget – it is
supervised by the Comptroller General, who
formally approves its budgets, based on a
compliance check with the budgetary guidelines
issued by the Budgetary Authority. MIDEPLAN is in
charge of verifying that the entities comply with the
National Development Plan goals and objectives,
but does not have instruments to enforce this.
MAIN ACTORS INVOLVED IN THE NATIONAL BUDGET PROCESS
National Budgetary Authority
– Ministry of Finance
Prepares the annual budget and issues a medium-term fiscal framework
(current year plus four years) for the central government
Budgetary Authority Issues“guidelines”on budget policies, wage, employment, debt and investment
matters
Technical Secretariat of the Budgetary
Authority – Ministry of Finance
Provides technical reports to support the discussions and decisions of the
Budgetary Authority
Central Bank Prepares macroeconomic assumptions
1. Manage budgets within clear, credible and predictable limits
for fiscal policy;
2. Closely align budgets with the medium-term strategic
priorities of government;
3. Design the capital budgeting framework in order to meet
national development needs in a cost-effective and coherent
manner;
4. Ensure that budget documents and data are open,
transparent and accessible;
5. Provide for an inclusive, participative and realistic debate on
budgetary choices;
6. Present a comprehensive, accurate and reliable
account of the public finances;
7. Actively plan, manage and monitor budget execution;
8. Ensure that performance, evaluation and value for money
are integral to the budget process;
9. Identify, assess and manage prudently longer-term
sustainability and other fiscal risks;
10. Promote the integrity and quality of budgetary forecasts,
fiscal plans and budgetary implementation through
rigorous quality assurance including independent audit.
http://www.oecd.org/gov/budgeting/Recommendation-of-the-Council-on-
Budgetary-Governance.pdf
OECD RECOMMENDATION ON BUDGETARY GOVERNANCE (2015)

9
STRENGTHENING THE BUDGET FRAMEWORK FOR STRATEGIC PLANNING
l Insufficient co-ordination with the institutionally
decentralised sector. As the funding schemes
of the institutionally decentralised sector are
rigid, the government cannot re-allocate funds
from one spending area to the other according to
emerging priorities. In addition, co-ordination of the
institutionally decentralised sector is weak.
l Insufficient co-ordination of capital budgeting
across public institutions. The multiplicity of
budgets and lack of co-ordination mechanisms
have consequences on public investment. There
is no enforcement mechanism to ensure that
investments of the institutionally decentralised
public sector institutions are aligned with the NDP.
Specific challenges related to financing and
implementing NDP priorities include:
l High budget rigidities and lack of fiscal space. The
room for manoeuvre is very limited. About 95% of
central government expenditures are pre-assigned.
In addition, tax revenue as a percentage of GDP are
low in Costa Rica compared to OECD countries, as
well as other Latin American countries.
l Weak fiscal constraint. In practice, Costa Rica has
no effective fiscal constraint, and no mechanism
for facilitating and enforcing medium-term fiscal
discipline in the central government budget. This
results in systematic budget deficits.
l Limited budget transparency in terms of readability
of available documents. Due to inconsistencies in
the institutional classifications used by the different
ministries, and the different datasets available, it
is difficult to establish the link between objectives,
goals, indicators and available resources.
CHALLENGES
l Create and ensure fiscal space by reviewing the
formulas of budgetary earmarks; strengthening
the planning system; carrying out spending
reviews; envisaging time limits (‘sunset’) for new
programmes and reinforcing performance informed
budgeting practices.
l Align the institutionally decentralised sector
with government priorities through strengthened
accountability, monitoring and evaluation
mechanisms and development of a checklist
to apply when considering the creation of
an institutionally decentralised agency; the
development of conditionalities associated with
budgetary transfers; and the implementation of
high-level policy co-ordination.
l Ensure fiscal sustainability by re-activating the
well-designed constitutional requirements on
fiscal discipline; developing a comprehensive
medium-term fiscal framework; clustering the
responsibility to issue and monitor the compliance
and implementation of fiscal rules within one
institution; adopting tools and procedural rules
to make the fiscal examination of permanent
legislation more rigorous; considering the adoption
of a single, centrally-controlled treasury fund.
NEXT STEPS | BUDGET FRAMEWORK
HIGHLIGHTS
EARMARKED FUNDS AND MANDATORY EXPENDITURE
IN 2014 NATIONAL BUDGET
Billion
Colones
Share
(%)
Share of
GDP (%)
Total budgeted
expenditure
6,649 100 24.7
By constitutional
mandate
2,290 34.4 8.5
By legal mandate 1,497 22.5 5.6
Mandatory expenditure 2,528 37.9 9.4
Debt service 1,933 29.1 7.2
Interests 774 11.6 2.9
Amortization 1,159 17.4 4.3
Wages (excl. MEP and PJ) 585 8.8 2.2
Other expenditure (1) 344 5.2 1.3
Source: Ministry of Finance (2013), Marco Fiscal Presupuestario de Mediano
Plazo, 2013-2018 (Medium Term Fiscal Framework, 2013-2018) Dirección General
de Presupuesto Nacional, http://www.hacienda.go.cr/docs/52224ab8cd313_
MARCO%20PRESUPUESTARIO%20MEDIANO%20PLAZO%202013_2018.pdf

10
Costa Rica has established a professionalised civil service underpinned by a commitment to merit-based
public employment. However, a myriad of legislation and collective agreements has led to a plurality of
human resources management systems and policies, which results in significant disparity in the treatment
of employees across institutions.
Supporting human resources
management
l The Civil Service Regime (CSR) - the Constitution
of 1949 and the subsequent Civil Service Statue
of 1953 established the Civil Service Regime
to regulate public employment in the national
executive branch, which includes ministries and
their subsidiary bodies – a total of 47 entities cover
about one-third of public employees. Within and
across these entities, there is a relatively consistent
employment framework, with common pay scale,
job classification and terms and conditions of
employment.
l The Civil Service Directorate General (CSDG) - this
entity acts as the central co-ordinating agency for
public employment and HRM policies for the 47
entities of the CSR.
l Fragmented arrangements outside the Civil
Service Regime – most public institutions have
their own legislation regulating public employment
and HRM practices. In addition, collective
agreements in various institutions give employees
privileges regarding pay, bonuses, incentives,
working hours, which vary from one institution to
the next.
l The Budgetary Authority – many institutions
outside the CSR fall under the scope of the
Budgetary Authority. The Budgetary Authority
establishes and monitors the number of employees
for each institution under its scope and determines
payment policies according to guidelines issued by
the President and the Ministry of Finance.
CURRENT HRM ARRANGEMENTS
To develop a modern HRM system, Costa Rica
currently faces the following challenges:
l Lack of timely and accurate workforce data. It is
difficult to get an exact picture of the structure of
public employment and the number and distribution
of public employees, as there is no central database
to collect employee statistics in the CSR or beyond.
l A complex compensation system. Currently the
Costa Rican salary system is difficult to control,
adjust, target, and manage, due in part to the lack
of an integrated database on public employment,
no fiscal ceiling that limits the pay envelope,
complex combinations of bonuses and allowances
CHALLENGES
Creative
thinking
creativity and
innovation
Strategic
thinking
vision and
future
orientation
FUTURE COMPETENCIES NEEDED FOR AN AGILE, INNOVATIVE
BY OECD COUNTRIES
http://dx.doi.org/10.1787/9789264166707-en

11
SUPPORTING HUMAN RESOURCES MANAGEMENT
that differ greatly from employee to employee, and
an interrelated web of collective agreements and
legislation that tie increases in salary of one group
to another.
l Fragmented approach to competency management.
Many institutions are not able to evaluate
candidates with regards to specific competencies
needed to meet organisational goals and few
institutions align their annual training plan to a
long-term strategy based on organisational goals.
l Performance management is not linked to
broader organisational goals. Within the CSR, the
performance assessment system suffers from a high
level of complexity and ratings inflation.
l Limited institutional and individual leadership
development. Costa Rica does not currently target
training programmes towards managers or future
managers. However, this is a new priority of the
CSDG, which has recently created a new division for
management training.
HIGHLIGHTS
l Improve the quality and consistency of workforce
data to improve transparency and enable more
informed HRM decision making.
l Evolve towards a more merit-based, transparent
and sustainable compensation system, including
non-monetary incentives. Simplify the current
compensation system by beginning a gradual
transition towards a ‘single salary’ system. Given
the legal constraints, it may only be possible to
implement this policy for new employees.
l Introduce competency management as a
foundation for more strategic human resources
management, by building upon the existing job
classification system and eventually integrating this
competency framework into planning, recruitment/
selection, mobility and development practices.
l Simplify the performance management system
and increase its effectiveness by linking the
individual efforts of employees to larger
organisational goals. Consideration should
be given to improving the assessment ratings,
training managers and staff to use them, and
eventually linking them to career development and
advancement.
l Enhance the coherence of its CSR through
strengthened institutional and individual
leadership. This could include the development of
management accountability structures to ensure
delegation is met with capacity and accountability
at the level of individual organisations. Additionally,
the Human Resources Chief Management Assembly
and the Technical Advisory Council should be used
more effectively and the strategic management of
senior civil servants could be strengthened.
NEXT STEPS | HUMAN RESOURCES MANAGEMENT
Cooperation
working
collaboratively
across
boundaries and
relationship
building
Flexibility
flexibility
and change
management
PUBLIC SERVICE – FOUR META-COMPETENCIES IDENTIFIED

1412
Costa Rica has a longstanding tradition of committing to achieve proper management of public funds.
Different reforms have been carried out in recent years to strengthen the legal and institutional framework
of the country’s public procurement system and fight corruption. However, there is a need to further fine-
tune procurement-related functions and increase transparency and accountability.
Supporting integrity policies
in public procurement
l Key actors – the Comptroller General, the Ministry
of Finance (Department of Property Management
and Public Procurement, DPMPP), the Digital
Government Technical Secretariat, and specialised
units within each institution are the key actors in
the procurement process.
l The Procurement Act, enacted in 1995, is the most
important legislation regarding procurement and
defines the procurement plan and procedures. Other
institutions, such as the Costa Rican Electricity
Institute, have their own public procurement rules.
l Recent reforms were carried out at different levels,
both for the legal framework and the institutional
set-up. The Procurement Act was revised in 2006,
which promoted the adoption of framework
agreements.
l Importance of general government public
procurement – it accounted for approximately 15%
of GDP (excluding oil revenues) and 30% of general
government expenditure in 2014.
CURRENT PUBLIC PROCUREMENT ARRANGEMENTS
Public procurement in Costa Rica is predominantly
framed as an administrative task, rather than
focusing on the strategic leverage of the procurement
function. To shift towards a more strategic
perspective on procurement, the following challenges
have to be addressed:
l No centralised purchasing body or procurement
authority exists with a strategic mandate to provide
a cohesive procurement vision, guidelines, co-
ordination and performance management criteria.
l A strongly fragmented procurement system.
There are several platforms in place. The
multiplicity of procurement bodies limits
opportunities for creating economies of scale and
lowering prices.
l Ex-post controls in Costa Rica are limited, as
opposed to a general trend in many OECD countries
to move away from ex-ante audit assignments and
towards ex-post audit assignments and greater focus
on internal controls and performance.
CHALLENGES

13
SUPPORTING INTEGRITY POLICIES IN PUBLIC PROCUREMENT
l Different financial thresholds exist among
institutions to carry out different procedures. Most
OECD countries have a single set of thresholds,
independent from the budget size of individual
procurement entities.
l High percentage of limited tendering. 82% in terms
of number and 40% in terms of the procedures were
awarded through limited tendering, in contrast to
most OECD countries, where public bidding is the
most common procurement procedure.
l Lack of a professionalised procurement workforce.
Procurement officials adopt a compliance-based
approach to procurement, rather than a strategic
approach based on outcomes, since there is no
professionalised procurement workforce.
l Lack of an institutionalised mechanism for civil
society to participate in the procurement process.
HIGHLIGHTS
l Agree on a single procurement platform which
covers the whole public sector, including the
autonomous entities. The platform could also
establish a system of “red flags” or mechanisms
to track decisions and enable the identification
of irregularities and potential corruption cases in
public procurement.
l Consider the creation of an authority to set a
national procurement vision and to work in
a cohesive manner toward clear priorities and
objectives.
l Apply a unique set of financial thresholds for
procurement procedures, clarify good practices
for contract clustering, and develop a system to
track decisions and enable the identification of
irregularities and potential corruption cases.
l Enhance the professionalisation of the
procurement workforce by providing adequate
incentives to attract highly qualified officials
and by updating officials’ knowledge
and skills on a regular basis to reflect
regulatory, management and
technological evolutions.
l Enhance stakeholder
involvement throughout
the different stages of the
procurement process.
NEXT STEPS | PUBLIC PROCUREMENT & INTEGRITY
E-procurement
Balance
Evaluation
Capacity
Accountability
Access
Risk
Management
Efficiency
Integrity
Integration
ParticipationTransparency
OECD
RECOMMENDATION
ON PUBLIC
PROCUREMENT
(2015)
www.oecd.org/gov/ethics/
Recommendation-on-Public-
Procurement.pdf

1414
Working together and striking a balance between the interests, capacities and objectives of national and
sub-national levels is essential for more effective public policy outcomes. Despite important economic
development since the 1970s, Costa Rica displays significant territorial imbalances and a rural-urban split. A
constitutional reform of 2001 has formally allocated more power and budget to sub-national levels.Yet, the
associated budgetary transfer (10%) has not been carried out.
Improving
multi-level governance
l Costa Rica is a unitary country composed of
seven provinces – provinces are divided into 81
administrative units (cantones), each of them
directed by a mayor who is elected every four
years. The lower administrative level includes
423 districts. Only the central government and
municipalities (or cantones) have administrative
powers.
l The Constitution allocates substantial, yet
undefined, power to municipalities – municipal
actions are mostly framed and organised by the
central government and national regulation.
l An important role for the institutionally
decentralised sector in service delivery – a large
part of public expenditure is executed by the
institutionally decentralised sector which is in
charge of producing key services.
l The role of federations of municipalities and
cantonal councils – these represent a potential
asset for Costa Rica’s multi-level governance
system. For example FEDOMA, which federates
11 municipalities in the central region, provides
capacity-building for its members.
l Low levels of public expenditure at the local level
– the institutionally decentralised sector accounts
for a large share of public expenditure, while the
territorially decentralised sector accounts for a
minor share. Municipalities currently represent only
about 4% of total general government consolidated
expenditure.
CURRENT MULTI-LEVEL GOVERNANCE ARRANGEMENTS
Tejiendo Desarrollo is a recently
introduced policy framework
supporting community-led
development processes. The
objectives of the network are the
following:
l to promote participation of
civil society in development
processes,
l to articulate the sectoral organisation of the
government and
l to design policies that respond to the priorities of
local actors.
The National Development Plan describes the network
and its two key components: to promote development
processes in specific territories (10 territories which
comprise 34 cantons) and to develop a National Policy on
Regional and Territorial Development with civil society
participation led by MIDEPLAN.
TEJIENDO DESARROLLO –‘WEAVING DEVELOPMENT’
http://documentos.mideplan.go.cr/alfresco/d/d/workspace/SpacesStore/
cd1da1b4-868b-4f6f-bdf8-b2dee0525b76/PND%202015-2018%20Alberto%20
Ca%C3%B1as%20Escalante%20WEB.pdf

15
IMPROVING MULTI-LEVEL GOVERNANCE
To foster genuine multi-level governance throughout
the country, Costa Rica needs to address the following
challenges:
l Limited access to basic public services for the rural
poor population. Accessibility to basic public services
in Costa Rica depends on income and location.
Reduced access to basic services has territorial
features.
l Foreign Direct Investment and tourism have
developed weak links with local businesses. Current
trends in Costa Rica’s productive framework challenge
the national governance system. International
competition to attract FDIs in knowledge-intensive
industries has been dramatically increasing and there
is a need to enhance the country’s competitiveness
through local linkages and reduce current geographic
disparities in job creation.
l The limited role of sub-national authorities.
When compared with OECD countries, Costa
Rica’s governance is based on a system where the
central level, and in particular the institutionally
decentralised sector, plays a key role in delivering
policies and services, while sub-national authorities –
including municipalities – are marginal. In particular,
sub-national expenditure is low in all domains.
l Shortcomings of the current institutional framework
vis-à-vis citizens. The system fails to provide citizens
with tailored services in different areas of the country
(i.e. the current rural-urban split). Due to economic
development, citizens demand a large range of
public services, which are also diversified according
to their specific needs. In addition, citizens’ negative
perception and expectations can be fuelled by a
largely incomplete process of devolution: citizens
can elect their mayors since 1998, but the latter have
limited resources to develop and implement policies.
CHALLENGES
HIGHLIGHTS
NEXT STEPS | MULTI-LEVEL GOVERNANCE
l Use contracts to facilitate the functional
relation between the central government and
municipalities. A contract helps to identify a
specific task to devolve to a given municipality,
clarifies the scope of the devolved activity and even
its timeline, if relevant. In addition, a contract helps
to clarify the expected outcomes, contributing to
greater trust in institutions.
l Create a network of community agents to provide
local government with capacity building. In order
to promote standardisation and exchange of
information, existing cantonal councils for co-
ordination could be networked by MIDEPLAN,
which would serve as the central hub and would
be in charge of training the agents to be sent to
municipalities.
l Introduce flexibility in the governance system to
help to tailor policies to places. Costa Rica needs
to put in place a governance system that is able
to generate a range of policies that adapt to the
different features of the communities they intend
to serve. This requires flexibility and the possibility
to experiment with different territorial systems.

The OECD Public Governance andTerritorial Development Directorate helps countries implement strategic,
evidence-based and innovative policies to strengthen public governance and improve citizens’trust
in government.The areas of work addressed in Costa Rica’s Public Governance Review build upon the
Directorate’s daily work.This work involves carrying out policy analysis and peer reviews, facilitating policy
committees and networks, and developing recommendations, instruments and principles.
OECD public governance and territorial
development directorate – areas of work
Centre of government
Moving away from the traditional role of serving
the executive from an administrative perspective,
centres of government are now playing a more
active role in policy development. OECD work on
centres of government explores how governments
can adapt the institutions at the Centre in order to
play this expanded and more outward-looking role.
As part of its work on centres of government, the
OECD convenes the Network of Senior Officials from
Centres of Government in annual meetings.
http://www.oecd.org/gov/cog.htm
Monitoring and evaluation
In the quest for inclusive outcomes, governments
are increasingly making use of monitoring and
evaluation systems to maximise the use of scarce
resources and ensure that the results achieved reflect
the intended outcomes. Recently, the OECD convened
a symposium on public sector performance and
annually organises the Senior Budget Officials
Network on Performance and Results.
http://www.oecd.org/gov/budgeting/seniorbudgetofficials
networkonperformanceandresults.htm
Budgeting and strategic planning
Maintaining fiscal discipline, allocating resources to
where they are most valued, and achieving greater
efficiency in government operations have a crucial
impact on overall national economic performance.
The OECD developed guidelines on independent
fiscal institutions and budgetary governance,
facilitates the Working Party of Senior Budget
Officials and carries out country budget reviews.
http://www.oecd.org/gov/budgeting/
AREAS OF WORK ADDRESSED IN COSTA RICA’S REVIEW
Human resource management
Public administrations need the right people in the
right place, at the right time, and with the right
skills, if they want to meet today’s challenges. The
OECD’s work on strategic workforce management,
including reviews of human resource management
in government, highlights governments’ efforts to
promote strategic workforce planning.
http://www.oecd.org/gov/pem/
Integrity and public procurement
Integrity is essential for building strong institutions
resistant to corruption. The OECD developed a set of
recommendations to enhance integrity and prevent
corruption in the public sector and to ensure a
strategic use of public procurement. The OECD carries
out reviews on public sector integrity and public
procurement to help policy makers improve policies,
adopt good practices and implement established
principles and standards.
http://www.oecd.org/gov/ethics/
Multi-level governance
Sub-national governments provide substantial public
services and they are close to the citizen. Therefore,
effective multi-level governance plays an important
role in delivering inclusive growth outcomes. The
OECD publishes territorial reviews at the national,
regional and metropolitan levels and promotes good
practices in the area of multi-level governance of
public investment.
http://www.oecd.org/gov/regional-policy/multi-levelgovernance.htm
1416

Regional development helps governments foster
competitive dynamic regions to achieve their
economic, social and environmental objectives.
http://www.oecd.org/gov/regional-policy/
Regulatory policy helps governments achieve their
policy objectives through the use of regulations, laws
and other regulatory instruments.
http://www.oecd.org/gov/regulatory-policy/
Gender – empowering and encouraging women to
participate in the public sphere is essential to ensure
a balanced perspective on policy making and is
associated with improvements in social outcomes.
http://www.oecd.org/gov/women-in-government.htm
Justice – The OECD work on justice services aims
at supporting improved citizen access to justice by
strengthening citizen focus of justice services.
http://www.oecd.org/gov/oecd-expert-roundtable-equal-access-
to-justice.htm
ADDITIONAL AREAS OF WORK
Below: Luis Guillermo Solís Rivera, President of Costa Rica and Angel Gurría,
Secretary-General of the OECD. Paris, France, 5 June 2015.
Government at a Glance, now in its fourth edition,
includes a dashboard of key indicators to help analyse
international comparisons of public sector performance.
http://www.oecd.org/gov/govataglance.htm
Open government – including the opening up of
government processes, proceedings, documents and
data for public scrutiny and involvement – is now
considered a fundamental element of a democratic
society.
http://www.oecd.org/gov/open-government.htm
Digital government explores how governments can
best use information and communication technologies
to embrace good government principles and achieve
policy goals.
http://www.oecd.org/gov/public-innovation/
Public sector innovation – governments are finding
new ways of operating and responding to public needs
in a globalised and networked world characterised by
rising citizen expectations and financial constraints.
These efforts are supported through the OECD
Observatory of Public Sector Innovation.
https://www.oecd.org/governance/observatory-public-sector-
innovation/

For further information:
@OECDgov
www.oecd.org/gov
Brochuredesignbybaselinearts.co.uk

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